The Bank of England (BoE) said that employment and investment in the UK are expected to be flat over the coming year as part of the repercussions of the Brexit vote previously declared in June.
The data came from the survey of businesses by the central bank which follows whether it should cut interest rates again this 2016. The survey is done by BoE’s regional agents who speak to companies around the country.
The said agents discovered hints of resilience in consumer spending and the housing market thus far, but also witnessed an increasing unwillingness among businesses to hire and invest. “Investment and employment intentions had fallen, and were consistent with broadly flat levels of capital spending and employment over the coming six to 12 months,” claimed the BoE.
The survey revealed the weakest plans among British firms since year 2010.
The outlook for hiring is further proven uncertain as a survey by the Recruitment and Employment Confederation disclosed employers are planning to hire more staff to meet demand in the coming months, but confidence about future investment and hiring declined.
The bank stated it forecasts the country’s growth rate to move than halve in 2017 to 0.8%. On Wednesday, the Organization for Economic Co-operation and Development (OECD) think tank in Paris halved its expectations for Britain’s economic growth next year to 1.0%.
With this weak outlook, BoE is likely to slash rates again according to expectations. Current interest rates are already hanging at a historical low, to just a fraction above zero in November.
Britain’s official statistics also cited on Wednesday that the Brexit referendum seemed to have barely any impact on the economy so far, yet longer-term effects are still unclear and are remained to be seen.
The central bank stated in the week prior that most of its policymakers still anticipated decreasing borrowing costs unless their long-term economic outlook changed, despite budding signs that the immediate post-referendum slowdown will be less sharp than initially feared.
UK voted to leave the European Union last June 23, 2016, in a 52% to 48% outcome. Still, despite initial distresses that exiting the trading bloc would deteriorate the economy, there is still no sign of major collapse in confidence as FTSE 100 soared and hit 6,900 today as banking stocks climbed.
We can also credit the rally to the Bank of Japan announcing new monetary policy measures and anticipation on the Federal Reserve’s policy decision due later in the day. Generally, European stocks jumped on these events and FTSE 100 was further buoyed by financial stocks.
On the chart below displaying the daily time frame of the FTSE, the current candle is off the high reached today, but is still up by 20% to 6,806.00. The five last candles have been steadily recovering from a breakout decline that started on a bullish candle last September 12, and we expect another rally for the next session.